Friday, March 07, 2014

Detroit Retirees File Objections to Bankruptcy Restructuring In Federal Court

Court Hit With Sad Stories From Detroit Retirees Objecting To Bankruptcy Cuts

March 6, 2014 5:06 PM

DETROIT (WWJ/AP) — As courts, leaders in Lansing and Detroit struggle in the wake of the city’s bankruptcy filing with decisions about pensions promised to Detroit retirees, the pensioners themselves are speaking.

Emergency Manager Kevyn Orr has made it clear pensions have to be cut for the city to survive bankruptcy, with a proposal of a 26 percent slash for everyone except police and fire retirees, who would lose 6 percent.

Those potentially affected by the bankruptcy filing — about 34,000 pensioners — are able to object to it by filing complaints with the U.S. Bankruptcy Court. There are about 90 objections in the file right now, according to court records.

Some are sending heartbreaking stories.
In one letter to Judge Steven Rhodes, a retiree wrote she’s “heart broken” and says her husband is blind and on dialysis. She writes if any part of her money was cut she “might as well dig a hole in my back yard to lay us both to rest because I surely cannot or will not be able to pay for a funeral.”

The letter ends with the woman asking the judge to “please help me to keep all my retirement benefits.”

Another man explains that his two-income household is now a one-income household since his wife lost her job in 2012. “I am in the poor house, or you can say out in the streets,” he wrote.

One man said he “drove garbage trucks, cut grass and did a lot of jobs that needed done,” as a longtime city employee, and says “I’m not crying, but I will be if you let them take our money.”

A 29-year bus mechanic says he has lingering neck and back problems from continual bending and stooping on the job, needs his health insurance, and says the cut “will make me eligible for state assistance for the first time in my life.”

Gov. Rick Snyder pledged $350 million of state money in January to help fund pensioners and the Detroit Institute of Art; another $330 million is expected to come from private sources. It’s unclear if or how much that would offset cuts.

The Detroit Free Press is reporting Detroit reached a new deal Thursday with Barclays to borrow at least $120 million to “speed the city’s bankruptcy restructuring and invest in new services.”

This comes after a federal bankruptcy judge who vetoed two previous deals between Detroit and lenders to settle hundreds of millions of dollars in pension debt had a hearing Wednesday on a third tentative agreement.

Detroit emergency manager Kevyn Orr announced Tuesday night the banks agreed to accept $85 million from the city to settle the debt.

Judge Steven Rhodes vetoed two earlier tentative deals for Detroit to pay $230 million and $165 million to UBS and Bank of America Merrill Lynch to settle the debt incurred in 2009 when the city pledged casino taxes as collateral to avoid defaulting on pension debt payments. The city ended up locking itself into high interest rates on bonds, and the deal became too costly when interest rates plunged.


Bond insurer may oppose new deal to end Detroit swaps

Wed, Mar 5 2014

DETROIT, March 5 (Reuters) - Detroit's latest proposal to end costly interest-rate swaps is likely to be opposed by Syncora Guarantee, an attorney for the bond insurance company said in U.S. Bankruptcy Court on Wednesday.

"There is a likelihood there may be an objection," Stephen Hackney, Syncora's attorney at law firm Kirkland & Ellis, told Judge Steven Rhodes at a status hearing on the city's motion on the swaps deal.

The city on Monday had asked the court to approve a new deal to terminate the swaps, which were used to hedge interest rate risk on some pension debt, at a cost to the city of $85 million.

Syncora, which insured some of the city's pension debt associated with the swaps, as well as the swaps themselves, fought prior deals to end the hedges, claiming that such a move would cause it financial harm.

The bond insurer and other Detroit creditors have also claimed that the city was affording more favorable treatment to swap counterparties UBS AG and Merrill Lynch Capital Services.

Robert Hertzberg, an attorney at law firm Pepper Hamilton who is representing Detroit, asked the judge to hold a March 20 hearing on the swaps deal with the city's emergency manager Kevyn Orr testifying, but Rhodes did not immediately set a date.

He rejected two previous deals on the swaps that carried price tags of $165 million and around $230 million as being too expensive for the city.

The swaps soured when interest rates dropped along with Detroit's credit rating and big termination fees owed to swap counterparties helped push the city in July to file the biggest municipal bankruptcy in U.S. history.

In its motion, Detroit said court approval of the new swaps deal would give the city unfettered access to casino tax revenue used as collateral for the swaps as well as leverage in efforts to win Rhodes' approval of its debt adjustment plan. That plan calls for cuts to worker pensions and even bigger cuts for some bondholders.

Rhodes also heard arguments on the timetable he released last month that set a trial beginning June 16 on the plan's factual issues. Some creditors wanted a trial date in July or September. The judge said he will issue a revised schedule soon.


Judge considers slight delay to Detroit bankruptcy timeline

6:16 PM, March 5, 2014
By Nathan Bomey
Detroit Free Press Business Writer

Judge Steven Rhodes today signaled that he may slightly delay Detroit’s fast-track bankruptcy to give creditors and retirees more time to consider the city’s restructuring plans.

Rhodes told attorneys that he plans to file a new scheduling order outlining dates for the city’s restructuring hearings.

He previously proposed a confirmation hearing to start June 16 on whether to approve Detroit’s bankruptcy restructuring proposal, but it appears that will be pushed back.

The judge also signaled that he would give creditors more time to vote on the city’s plan of adjustment after a proposed April 14 hearing on whether the city has disclosed enough information about its restructuring plans. Votes from Detroit’s 170,000 creditors must be tabulated before the plan confirmation hearing can begin.

Separately, the city’s bankruptcy lawyers asked Rhodes to conduct a hearing on March 20 to consider approving a new proposed settlement with UBS and Bank of America Merrill Lynch over a disastrous pension debt interest-rate transaction called swaps.

The city on Monday night revealed a deal to pay the banks $85 million to eliminate the $288-million obligation, which secured a steady interest rate of 6% on a $1.4-billion pension borrowing transaction brokered in 2005 by former Mayor Kwame Kilpatrick’s administration.

Rhodes previously rejected settlements of $165 million and $230 million, saying it was “just too much money” to eliminate a deal that might have been illegal to begin with.

Detroit bankruptcy lawyer Robert Hertzberg said Detroit emergency manager Kevyn Orr would testify during the swaps hearing. He asked Rhodes to expedite the hearing and said it should only take a day.

The judge said he would consider the request and issue a written order on the issue.

Hertzberg said the city needs to proceed quickly with the swaps settlement to keep its broader restructuring plan on a fast track.

Stephen Hackney, an attorney for bond insurer Syncora, one of the city’s fiercest opponents in bankruptcy court, said the new deal shouldn’t be rushed.

“There is no emergency,” Hackney said.

Rhodes suggested Syncora’s opposition to the deal is inevitable.

“You’re not going to settle, so let’s just get to it,” Rhodes said. “Seriously, c’mon.”

Contact Nathan Bomey: 313-223-4743 or nbomey@freepress.com. Follow him on Twitter @NathanBomey.

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